Income Tax Severed Letters - 2005-03-11

Ruling

2005 Ruling 2004-0105801R3 - Transfer of Property between Trusts

Unedited CRA Tags
248(1) 5000(1)(e) 5000(1)(c.2) 107.4

Principal Issues: Will the distribution of units of a quasi-mutual fund trust to two RPP trusts be a lawful distribution of units to the public for purposes of subparagraph 5000(1)(c.2)(ii) of the Act?

Position: Question of fact. In this particular instance yes.

Reasons: Previous positions taken in 2002-0124423 and 2004-0094841.

2005 Ruling 2004-0108491R3 - Financially dependent child, mental infirmity

Unedited CRA Tags
60(l) 146(1) 146(8.1)

Principal Issues: For purposes of clause 60(l)(v)(B.01), is a child financially dependent on an annuitant by reason of physical or mental infirmity?

Position: Yes

Reasons: Evidence provided by legal representative to support conclusion that child was financially dependent on annuitant at time of death by reason of mental infirmity. In this case, the child had income of less than the personal amount in 2003, and this suggests that the child was financially dependent on the annuitant at the time of death. Also, the child is recognized under the XXXXXXXXXX as having a mental impairment and receives social assistance from the province as a result of this impairment.

2004-010849
XXXXXXXXXX G. Moore
(613) 957-8289
XXXXXXXXXX , 2005

2005 Ruling 2005-0110701R3 - Gift Subject to Conditions

Unedited CRA Tags
110.1 248(31) 15(1)

Principal Issues:
Whether a donation constitutes a gift for income tax purposes when the donation is subject to various conditions.
Where a corporation, its controlling shareholder and two charities enter into an agreement with respect to a donation, will subsection 15(1) apply to include the amount of the donation made by the corporation in the shareholder's income?
Whether the amount of the advantage in respect of the naming rights granted to the shareholder is nil for the purposes of draft subsection 248(31).

Position:
Based on the facts, it is our view that the donation would constitute a gift for income tax purposes.
Not in this case. The terms of the agreement provide that the corporation will make the gift.
Factual determination. In this case, the faculty, scholarships, chairs, etc. will be named after the shareholder and another individual. Provided that there is no prospective economic benefit associated with the naming rights, it is our opinion that the amount of the advantage would be nil.

Reasons:
In previous files, we concluded that the fact that there are conditions attached to a gift similar to those present in this case does not, in itself, negate the gift.
The corporation, the shareholder and the charities are all parties to the agreement.
In a previous ruling (2003-0043013), we consulted with the Valuations Section on this issue and were advised that in order to have value, there must be a prospective economic benefit associated with the naming rights.

XXXXXXXXXX 2005-011070

2004 Ruling 2004-0098641R3 - Paragraph 149(1)(c)

Unedited CRA Tags
149(1)(c)

Principal Issues: Does a particular First Nation qualify as a public body performing a function of government for purposes of paragraph 149(1)(c)?

Position: Yes

Reasons: The First Nation can be considered a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c).

Ministerial Correspondence

21 February 2005 Ministerial Correspondence 2004-0104611M4 - Indian tax - Guideline 4 and also fishing income

Unedited CRA Tags
81(1)(a)

Principal Issues: Information requested regarding the interpretation of Guideline 4 and also the taxation of fishing income earned by status Indians.

Position: Guideline 4 requires that the employer be resident on a reserve, which determination is a question of fact. Further, the employer must be a band with a reserve, or a tribal council representing such bands. The employer organization must be dedicated to the social, cultural, educational or economic development of status Indians who, for the most part, live on reserves. The employee's duties must be in connection with the employer's non-commercial activities carried on for the benefit of Indians who for the most part live on reserves. Fishing income is taxed in accordance with the principles outlined in the Southwind case. Accordingly, the location where the principal income earning activities of the business take place is the primary connecting factor, with the location of customers also being important. If fishing takes place off-reserve and the catch is sold to off-reserve customers, the income will not be connected to a reserve and will be taxable.

Reasons: General information provided

21 February 2005 Ministerial Correspondence 2004-0107421M4 - Indian employment income

Unedited CRA Tags
81(1)(a)

Principal Issues: Would the employment income of status Indian employees be tax-exempt?

Position: No

Reasons: There must be connecting factors sufficient to connect the employment income to a reserve. Such factors do not exist in this case.

Technical Interpretation - External

9 March 2005 External T.I. 2005-0118531E5 - Part VI.1 tax; redemption; substantial interest

Unedited CRA Tags
191(2)

Principal Issues: timing for substantial interest test

Position: immediately before redemption of shares

Reasons: past position should be maintained

9 March 2005 External T.I. 2005-0118641E5 - Employment Benefit Motor Vehicle Travel Allowance

Unedited CRA Tags
6(1) 81(3.1) 6(6)

Principal Issues: Whether a motor vehicle allowance to commute daily from home to work is taxable when it is paid to a XXXXXXXXXX who is employed for a XXXXXXXXXX period in the summer as a XXXXXXXXXX ?

Position: Yes.

Reasons: Paragraph 6(1)(b) of the Act includes the allowance in income. Subsection 81(3.1) of the Act cannot apply because the distance between the employee's home and the work location is less than 80 kilometres.

8 March 2005 External T.I. 2005-0114681E5 - Purchase of a business

Unedited CRA Tags
1102(5)

Principal Issues: Purchase of leasehold interest

Position: Allocate between Class 1 and Class 13

Reasons: 1102(5)

7 March 2005 External T.I. 2005-0110651E5 - Employment Income

Unedited CRA Tags
6(4) 153(1) 248 "automobile"

Principal Issues:
1. What is the filing deadline for T4 information returns?
2. How is the taxable benefit for a "term insurance benefit" computed?
3. Does an employee have to pay CPP and EI on salary and wages earned while on long-term disability?
4. How is the taxable benefit for use of an automobile computed?
5. Does the acquisition of a vehicle from the employer give rise to a taxable benefit?

Position:
1. Last day of February of the calendar year that salary or wages is paid to an employee.
2. Section 2700 of the Regulations.
3. Yes.
4. Paragraph 6(1)(k) and paragraph 6(1)(e) of the Act or paragraph 6(1)(a) of the Act.
5. Question of fact.

Reasons:
1. Section 205 of the Regulations.
2. Subsection 2701(1) of the Regulations computes the benefit for purposes of subsection 6(4) of the Act.
3. Subsection 21(1) of the CPP Act and subsection 82(1) of the EI Act.
4. Paragraph 6(1)(e) for standby charge and paragraph 6(1)(k) for operating benefit or paragraph 691)(a).

7 March 2005 External T.I. 2005-0114981E5 - Subsection 20(24) of the Act

Unedited CRA Tags
20(24) 12(1)(a) 12(1)(e)
Summary Under
Tax Topics - Income Tax Act - Section 20 - Subsection 20(24)
s. 12(1)(e) inclusion

Principal Issues: Whether it is possible for a taxpayer to deduct an amount under subsection 20(24) of the Act in respect of an amount included in income in the taxation year under paragraph 12(1)(e)?

Position: Yes.

Reasons: Subsection 20(24) of the Act provides for a deduction from income for certain payments made to obtain another person's agreement to assume obligations for which an amount has been "included under paragraph 12(1)(a) in computing a taxpayer's income for a taxation year". The application of subsection 20(24) of the Act is not restricted to a transferred obligation for which an amount has been included in a taxpayer's income in the current taxation year under paragraph 12(1)(a) (subsection 20(24) refers to "a taxation year"). Therefore, subsection 20(24) of the Act may also apply to a transferred obligation for which an amount has been included in a taxpayer's income in a taxation year under paragraph 12(1)(e).

7 March 2005 External T.I. 2004-0099351E5 - SBIT holds shares in corp employing RRSP annuitant

Unedited CRA Tags
R. 4900(8) R. 5103(1)

Principal Issues: Is an SBIT a qualified investment of an RRSP where the SBIT holds shares in a corporation which employs the annuitant of the RRSP.

Position: Question of fact. However, the particular fact as outlined in the principal issue would not, and of itself, prevent the SBIT from being a qualified investment of the RRSP.

Reasons: There are no specific provisions in the Act that prevent this type of situation. However, subsection 4900(8) of the Regulations must be considered.

7 March 2005 External T.I. 2005-0110431E5 - UK pension transfer to Canada

Unedited CRA Tags
56(1)(a)(i) 60(j)

Principal Issues: Can a U.K. pension be transferred to an RPP or RRSP in Canada?

Position: If all conditions in 60(j) are satisfied, yes.

Reasons: Clearly provided for under the Act.

4 March 2005 External T.I. 2005-0109731E5 - Taxable Benefit-Weight Loss Program

Unedited CRA Tags
6(1)(a)

Principal Issues: An employer is planning to make a weight loss program available to all of its employees. The employees who choose to participate will be charged a nominal fee. Whether or not a weight loss program is a taxable employment benefit.

Position: Yes.

Reasons: If a weight loss program is provided to employees, they are in receipt of a taxable benefit. The benefit is calculated as the cost of the program to the employer less any recoveries from an employee who participates in the weight-loss program.

3 March 2005 External T.I. 2004-0096371E5 F - Revenu tiré d'un emploi et 110(1)f)(iii)

Unedited CRA Tags
110(1)f)(iii)
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 110 - Subsection 110(1) - Paragraph 110(1)(f) - Subparagraph 110(1)(f)(iii)
no special tests under s. 110(1)(f)(iii) for determining whether the individual is self-employed

Principales Questions: Est-ce qu'il existe une politique administrative particulière pour faire la détermination du statut d'un travailleur à titre d'employé ou de travailleur indépendant pour les fins du sous-alinéa 110(1)f)(iii) de la Loi ou si les critères habituels pour faire cette détermination s'appliquent.

Position Adoptée: Il n'y a pas de politique administrative particulière. Les critères énumérés dans la brochure RC4110 et établis par la jurisprudence sont utilisés.

Raisons: La détermination du statut " employé ou travailleur indépendant " est applicable aux fins de la notion de revenu tiré d'un emploi de façon générale.

2 March 2005 External T.I. 2004-0084891E5 - Securities lending arrangement

Unedited CRA Tags
260(1)(c) 260(5) & (6) 260(8)

Principal Issues:
(a) Does CRA interpret the words in paragraph 260(1)(c) of the definition of a "securities lending arrangement" ("Definition") as meaning that a borrower of a qualifying security must have disposed of the security before a dividend is paid by the issuer in order to meet the dividend compensation payment criteria in the said paragraph?
(b) Are the words "amounts equal to ... all dividends, if any, paid on the security" in paragraph 260(1)(c) of the Definition interpreted by CRA as meaning the gross amount of a dividend paid by the issuer of the borrowed security or as meaning the net amount after, for example, deducting any applicable foreign taxes withheld at source from the dividend payment received
(c) Determine the tax consequences to the borrower upon the settlement of the right to acquire securities given by the borrower to the lender in the circumstances described in the letter.
(d) Are compensation payments made by a financial institution to a securities lender under a securities lending arrangement to which section 260 of the Act does not apply, where the financial institution has the borrowed securities on income account, deductible when paid pursuant to section 9 of the Act.

Position:
(a) Our general view is that a securities borrower is not required to have disposed of the borrowed security in order that the security lender meet the dividend compensation criteria in paragraph 260(1)(c) of the Definition.
(b) In our view paragraph 260(1)(c) of the Definition restricts the scope of application of subsection 260(1) to a share lending arrangement where, inter alia, the lender's opportunity for income in respect of the share is not changed as a consequence of the arrangement.
(c) General comments.
(d) General comments.

Reasons:
(a) Interpretation of the legislation.
(b) Interpretation of the legislation.
(c) Question of fact.
(d) Question of fact.

24 February 2005 External T.I. 2005-0114471E5 - Status Indian employment income

Unedited CRA Tags
81(1)(a)

Principal Issues: If a status Indian works for the federal government and 100% of the employment duties are performed on a reserve, what are the taxation implications?

Position: Guideline 1 would likely apply to exempt the employment income.

Reasons: General information provided

2005-011447
XXXXXXXXXX Renée Shields
(613) 948-5273
February 24, 2005

Technical Interpretation - Internal

21 February 2005 Internal T.I. 2005-0113311I7 - Guideline 4 - for the most part live on reserve

Unedited CRA Tags
81(1)(a)

Principal Issues: Comments were requested by the XXXXXXXXXX TSO on the phrase "Indians who for the most part live on reserves" in Guideline 4

Position: Most of the beneficiaries of the employer's activities must be reserve-resident Indians. Residency is a question of fact to be determined from a review of the individual's circumstances.

Reasons: Comments provided